Insured Contract
An insured contract is a category of agreement defined within certain liability policies for purposes of determining how specified contractually assumed liability is treated under the policy.
Definition
An insured contract is a policy-defined agreement under which specified liability assumed by an insured may fall within an exception to a contractual liability exclusion. The term does not refer generally to every contract entered into by an insured; its meaning is controlled by the categories, conditions, limitations, and definitions contained in the applicable liability policy.
Within commercial general liability structures, the concept commonly includes certain specifically identified agreements and certain portions of contracts in which the insured assumes another party’s tort liability. Tort liability refers to legal responsibility for bodily injury or property damage that would exist independently of the contractual assumption.
Structural Components
- Policy-defined status: An agreement must fall within the applicable policy definition rather than merely being described by the contracting parties as insured.
- Specified contract categories: Standard liability forms commonly identify particular classes of agreements that may qualify under the definition.
- Assumed tort liability: Certain business agreements may qualify to the extent the insured assumes another party’s tort liability for bodily injury or property damage.
- Indemnification obligation: Contractual indemnity or hold-harmless language may create the assumption of liability relevant to insured-contract analysis.
- Contractual liability treatment: Qualification as an insured contract commonly affects the operation of the policy’s contractual liability exclusion.
- Policy conditions and limitations: Applicable exclusions, definitions, endorsements, and coverage conditions continue to govern even when an agreement satisfies the insured-contract definition.
Parameters & Conditions
Whether an agreement constitutes an insured contract is determined from the insurance policy’s specific definition and the legal obligations created by the agreement. The contractual label, document title, or existence of an indemnification clause does not independently establish insured-contract status.
Standard commercial general liability structures commonly recognize specified agreements involving premises, easements, licenses, certain governmental obligations, elevator maintenance, and particular assumptions of tort liability. The precise categories may vary by policy form, edition, jurisdiction, and endorsement.
For contractual assumptions of tort liability, the relevant portion of an agreement is generally the portion under which the insured assumes another party’s legal responsibility for covered bodily injury or property damage. Obligations arising solely from the insured’s own contractual performance are conceptually distinct from an assumption of another party’s tort liability.
Insured-contract status does not by itself establish coverage for a claim. The underlying damages must still satisfy the applicable insuring agreement and remain subject to all other policy terms, exclusions, conditions, limits, and endorsements.
Topic Relationships
Exceptions, Limitations & Boundaries
An insured contract is not synonymous with any agreement signed by an insured. The term has a defined policy meaning, and agreements outside the applicable definition do not acquire insured-contract status merely because they contain insurance, indemnification, or risk-transfer requirements.
The concept also does not convert contractual performance obligations into covered liability. Requirements to complete work, correct defective work, satisfy warranties, pay contractual penalties, or perform other contractual duties are distinct from the assumption of another party’s tort liability.
Qualification as an insured contract does not eliminate other exclusions. Coverage may remain limited by provisions addressing expected or intended injury, damage to property, damage to work, professional liability, pollution, completed operations, or other policy-defined exposures.
Insured-contract status is also distinct from additional-insured status. A contractual indemnity obligation and a requirement to provide another party with additional-insured coverage are separate risk-transfer mechanisms, even when both appear in the same agreement.